@edmund360 wrote:
I guess I have some confusion. Our parents (in-law) some years ago, gave us a $10,000. gift. They indicated that they either would have to pay more Taxes or gift cash to their children? So I was thinking there is more to the rules today with pre-tax money? Please advise? Ed
Let's separate the responsibilities of the giver and the recipient.
The giver can give any gifts they want. However, they have to pay any taxes that might be due based on how the giver obtained the money. If the giver takes the money from wages, they pay tax on their wages. If the giver takes money from a savings account, they don't pay additional tax because they paid tax on the money before they deposited it (but they will pay tax on the interest in the savings account). If the giver sells stocks and gives the money to the recipient, the giver will pay whatever capital gains might be due on the sale of the stock (or it might even be a deductible loss if they sell stocks that have lost value).
Separately, the giver can be required to pay gift tax, but only if their lifetime total gifts is more than $14 million.
In short, the giver pays income tax based how much income and what kind of income they have, and their taxes are not affected by gifts they give out of their money.
The recipient generally never pays tax on gifts they receive. There is a rare exception, if the giver owed gift tax and did not pay it, that can sometimes be assessed on the recipient. But since the giver can give $14 million without owning gift tax, it is very rare that the recipient will have to pay tax of any kind.
